This past Monday, Royal Dutch Shell PLC (Shell) completed aUSD 50 billion acquisition of BG Group PLC (British Gas) that will give the Anglo-Dutch company a leg up in the Brazilian offshore oil game.
Speaking from Brazil, Shell CEO Ben Van Beurden said the new company will be more resilient “more resilient” to fluctuating oil prices and “more predictable” for investors. He added that Brazil is a “top three” country for Shell and that it will become “the most valuable country in our portfolio”.
The acquisition will bolster Shell’s position in the LNG market and turn it into the largest foreign oil company operating in Brazil. Shell is betting in Brazil and that the trouble it will undergo to navigate the turbulent politics and economy of the country will be worth it.
BG was an early mover in Brazil by investing in exploration in the oil-rich Santos basin when it was still viewed as unproven frontier. It was richly reward with a series of blockbuster discoveries thought to contain billions of barrels of oil. As Shell’s reserves drops, the BG acquisition will help curb the impact of that, boosting Shell’s production in a key market.
Source: The Wall Street Journal, February 16 2016